What’s the impact of the Supreme Court’s Medicaid change?

In responding to press inquiries today over the Supreme Court decision, there was some questions and confusion over the Medicaid part–and particularly how the ruling narrows what the federal government could do to get states to do the Medicaid expansion.

Leading up to the decision, the Medicaid challenge got far less attention that the issue of the individual mandate, and for good reason–the Medicaid expansion was upheld in all 11 lower courts and all 5 appeals courts. It was a shock that the Court even heard the arguments.

The new law says that states should have their Medicaid programs include not just low-income children, parents, seniors and people with disabilities–but also adults without children at home. In California, that’s potentially two million more in Medi-Cal.

If states don’t, the ACA allowed the federal government to withhold *all* federal Medicaid dollars for the state (in California, roughly $20 billion)–after all, covering these “childless adults” at or below the poverty level, are now a requirement of the Medicaid program.

I am not sure the federal government would have ever used this authority. That’s such a big stick that it’s almost impossible to pick up–it would have been quite a political standoff with a state. But no matter, the Supreme Court said that provision went too far. So states still have the option of expanding coverage, but they don’t risk the loss of all their Medicaid funds if they don’t.

But why would they decline the Medicaid expansion? For the first three years, the federal government would pick up the cost of 100% of the newly eligible. In 2017-18, then the federal government picks up 95% of the tab, and then down to 90%, into the future. Even in the out years, the federal government is providing a 9:1 match.

In terms of investments in health care, or in terms of economic stimulus, there’s no place that can get you the bang-for-your-buck of a 9:1 match. Why would any Governor or Legislature reject this?

Over a dozen years ago, Congress created the SCHIP program, and allowed states to do a child health expansion voluntarily, with no tie to Medicaid funding. The SCHIP program provides a 2:1 match. And ultimately, 50 states took advantage of his benefit.

California will take advantage of this provision, to cover nearly 2 million Californians. Think of just the economic stimulus–invest 1 dollar, put in 9 more dollars. What’s more, the expansion is to take care of a population that counties traditionally have to cover now, often at significant expense.

The only reason why a state wouldn’t take such a good deal is politics and ideology. But the one color that often trumps red and blue in green. It’s just too good a deal, money-wise. If the Governor and Legislature are reluctant politically, the medical establishment of that state will bring their influence to bear–they have a big interest in claiming that federal money to go into their health care system.

These issues are moot in California, which will go forward, full speed ahead. And frankly, I would be surprised if any state rejects this money, and declines to do the ACA’s Medicaid expansion.